With the US tightening the norms for H-1B visas under the President Donald Trump’s ‘Buy American, Hire American’ campaign, the Indian IT companies are bound to face disruptions by way of higher costs and even some laying off work force back home, as the rising rupee is aggravating the situation further for the technology export firms, an ASSOCHAM paper has cautioned. Nearly 86 percent of the H-1B visas issued for workers in the computer space go to Indians and this figure is now sure to be scaled down to about 60 percent or even less.
Remittances from US would decline hurting the balance of payment. World Bank data showed the US was the second largest source of remittance for India in 2015, behind Saudi Arabia, and about USD 10.96 billion-nearly 16 percent of the total inflows were sent to India. ASSOCHAM expects it to disturb the balance by eight to ten percent.
As the cost pressure would increase, aggravated by rising rupee leading to lower realizations, the Indian IT firms may be forced to displace work force.
“In that case, the chances of layoffs are real,” said ASSOCHAM Secretary General D S Rawat cautioned, while impressing upon the IT industry apex bodies and the government to work out a joint strategy to deal with the unfolding situation.
In the last three months, the Indian currency has gained by at least five per cent against US dollar, reducing net realizations for software exporters, among other export –oriented sectors.
“After all, our stakes are quite high. It is a question of USD 100 billion software export industry that employs over four million people and reservations for H1B visa for start-ups with less than 50 employee will decrease the number of visa available for Indian firms,” added Rawat.
According to the ASSOCHAM paper, the reverses resulting from the tightening of the H1B visas would force IT giants to create fundamental changes in their strategies in terms of hiring, salaries, jobs, impacting employees in India too.
The move would also have an adverse macro impact for the Indian external sector economy. Remittances from US would decline hurting the balance of payment.
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The World Bank data showed the US was the second largest source of remittance for India in 2015 with USD 11 billion nearly 16 percent of the total inflows.
“We expect disturbances in remittances by eight to ten percent,” the paper said, adding there would be fewer opportunities for individuals to work on offshore location.
With the UK already hiking the minimum wage requirement to 35,000 British pounds for tier II visa immigrants, this latest move by the US will act as a definitive dampener to the Indian outsourcing industry.
The alternate solutions for the Indian outsourcing industry are: investing in near shore centers – facilities close to the US, focus on local hiring in America and to work virtually, which is becoming easier with the wider adoption of cloud services and greater digitization.